Envoys try to narrow gaps on a loan plan for Ukraine ahead of Thursday’s crunch EU summit

European Union officials are working intensively to finalize a groundbreaking financial package that would leverage frozen Russian assets to fund Ukraine’s critical economic and military needs. Diplomats are racing to narrow disagreements ahead of a high-stakes EU leaders’ summit scheduled for later this week in Brussels.

The plan under consideration would use approximately 210 billion euros ($247 billion) in frozen Russian assets as collateral for a substantial loan to Ukraine. The International Monetary Fund estimates Ukraine needs around 135 billion euros ($157 billion) by early 2026 to maintain government functions and continue its defense efforts.

“We do not have the luxury of time,” warned Sweden’s EU Affairs Minister Jessica Rosencrantz during meetings in Brussels. “It is really time to move forward with a decision, and Sweden is willing to share the risk because the cost and risk of doing nothing is greater.”

The proposal represents unprecedented territory for the EU, carrying significant financial and geopolitical implications. The European Central Bank has expressed concerns that seizing foreign assets could potentially undermine international confidence in the euro. Several member states also worry about potential Russian retaliation through legal challenges or more aggressive means.

Belgium, which hosts most of the frozen assets through the financial clearinghouse Euroclear, remains the primary opponent to the plan. Belgian officials have consistently voiced concerns about potential Russian countermeasures, whether through international courts or more direct actions targeting Belgian interests.

European Council President António Costa has emphasized the urgency of reaching a decision, reportedly insisting that leaders should remain in Brussels until consensus is reached, regardless of how long negotiations take.

The assets in question were frozen shortly after Russia’s February 2022 invasion of Ukraine. Last Friday, the EU moved to place an indefinite freeze on these funds, effectively preventing Hungary and Slovakia—both considered to have Moscow-friendly governments—from blocking their use to support Ukraine. This strategic move also ensures that the assets cannot be used as bargaining chips in any future peace negotiations without European approval.

Two distinct approaches have emerged in discussions. The first option, known as a “reparations loan,” would utilize the Russian assets until Moscow agrees to pay for damages inflicted on Ukraine—a scenario many analysts consider highly unlikely under President Vladimir Putin’s leadership. The second option would involve the EU borrowing from financial markets, similar to its post-COVID economic recovery program, though this faces resistance from debt-burdened European economies.

The first option holds distinct political advantages, requiring only a qualified majority (approximately two-thirds) of EU countries for approval. This would circumvent potential vetoes from Hungary, which has repeatedly blocked EU support for Ukraine, and Slovakia, whose government has recently shown increasing resistance to further aid.

European Commission President Ursula von der Leyen has outlined plans for the EU to cover two-thirds of Ukraine’s needs for 2026 and 2027, amounting to a 90 billion euro ($105 billion) loan, with international partners providing the remainder. The arrangement would use accumulated cash balances from sanctioned Russian assets at Euroclear to create an EU debt instrument.

The Commission has emphasized that this structure preserves legal ownership rights. Ukraine would technically owe the EU the money but would only repay after sanctions are lifted and Russia agrees to war reparations. Once Putin paid reparations, Ukraine would repay the EU, which would repay Euroclear, which would then return funds to the Russian Central Bank.

The Russian Central Bank has already filed lawsuits against Euroclear in an apparent attempt to recover its frozen assets and increase pressure ahead of the summit. Moscow has consistently characterized the EU’s plans as “theft” of sovereign assets.

Despite safeguards designed to share risks among EU members, with countries like Germany and Sweden offering loan guarantees, Belgian officials remain unconvinced. The Belgian government has warned of “consequential economic, financial and legal risks” and expressed frustration that its concerns are being ignored by EU partners. Euroclear has not ruled out legal action if forced to transfer Russian assets.

Ukrainian President Volodymyr Zelenskyy strongly supports the reparations loan concept, calling it “a game-changer” that would provide Ukraine with “a financial security guarantee.” The funds would give Ukraine flexibility to allocate resources to its economy, infrastructure, or defense forces as needed based on evolving war conditions.